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I heard a completely new term recently: ‘Boommates’.
Apparently, it’s baby boomers who rent out a spare room in their house to a younger person who is looking for affordable housing.
I guess I shouldn’t be surprised, because single family homes in the US are now 47% higher than they were in early 2020 and half of all renters spent around a third of their income on housing this year.
The fact that the US has a housing shortage is hardly a new concept, which is probably one of the reasons why we at EFSI continue to see good activity in new real estate vehicles coming to market targeting the affordable housing sector.
It’s a good news story for the private markets, and one that isn’t told nearly enough, in my view. So much of the news media coverage of the real estate space in the past year or so has focused on the challenges in the commercial space, and while that’s understandable, it’s frustrating that the benefits of the affordable housing investment strategy get swept under the carpet.
It’s not as if this is restricted to a small group of opportunistic investors, either. MetLife has a couple of billion dollars of investment in the space. CalPERS just recently gave Nuveen $100m for its Affordable Housing Strategy. Big investors and asset managers are investing in the space, and that’s good news for the average American who would rather not have to get a ‘boommate’.
A lot of the naysayers out there will focus on what they perceive as ‘negative news’, such as those that suggest institutional investors are buying up a significant amount of the housing inventory. Yes, investors have been buying and do buy single family homes, and some will say that this crowds out the individual home buyer. But others refute that argument.
The only thing I know for sure is that private fund managers are looking to raise money for affordable housing developments, because at EFSI, we administer these funds, and we talk to these managers. And they are succeeding at raising money from a range of institutions who are happy with the returns on offer and like the fact that there is a societal benefit.
In a macroeconomic environment such as the one we are in now, where fundraising for private markets is more difficult generally than it has been, this is one success story that is largely enduring its own crowding out because of the coverage of the commercial real estate space, and the broader private credit markets.
But interest rates on the other side of the pond have now been cut, and many will be hoping that the same thing happens in the US. If that is the case, then the private markets affordable housing good news story should get better. Here’s hoping that will be the case.
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Anthony D. Mascia is Managing Partner at EFSI. Connect with him on LinkedIn here.
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